Airtel, Idea to see lower data realisations but volumes may rise: Analysts

More so, since Bharti and Idea have not made any pricing changes in their 1 GB packs, which is the highest selling monthly data pack variant accounting for a minimum 65% of 3G data revenues of incumbent carriers, said Sharma.Kalyan Parbat | ET Bureau | July 19, 2016, 22:59 IST

Nine months after Apple and IBM began working together on building mobile apps for businesses, some of the first fruits are about to appear at UK pharmacy chain Boots. KOLKATA: Bharti Airtel and Idea Cellular's moves to give huge data benefits for the same rate ahead of Reliance Jio Infocomm's 4G launch is likely to result in declining data realisations over the next three years although strong data traffic volumes could prove a silver lining, said analysts.

Brokerage UBS, for instance, expects Bharti and Idea's data realisations to reduce by 15% in FY17, 14% in FY18 and 13% in FY19 in the aftermath of the recent data allowances announced by the two incumbent carriers. Brokerage Citi Research estimates a 40% fall in per MB realisations during FY16-to-18, but expects it to be cushioned by higher usage, due to higher affordability.

"Recent pricing announcements may imply Bharti and Idea's per MB rates are likely to go down, but as long as average revenue per user (ARPUs) go up for the telcos, the expected decline in per MB tariffs may not be negative," HSBC analyst Rajiv Sharma said in a note, seen by ET.

More so, since Bharti and Idea have not made any pricing changes in their 1 GB packs, which is the highest selling monthly data pack variant accounting for a minimum 65% of 3G data revenues of incumbent carriers, said Sharma.

Market leader Bharti Airtel on Sunday slashed its effective data rates for prepaid customers, offering up to 67% more benefits for the same price, matched by No 3 carrier Idea, kicking off a desperate scramble to hold on to high-end data customers before Jio's launch. Stocks of both telcos fell sharply on Monday on fears of the financial impact but had recovered on Tuesday to close positive on the Bombay Stock Exchange.

The country's No 2 carrier Vodafone India is also poised to announce data tariff cuts in a day or two, its chief executive Sunil Sood said on the sidelines of an industry event on Tuesday.

According to UBS, the substantial cut in Bharti and Idea's effective prepaid data tariffs is clearly aimed to pre-empt any subscriber loss before Jio's launch and improve capacity utilisation, especially since a lot of capacity has been created with accelerated 3G/4G rollouts by both incumbent carriers in the last six months.

The Swiss brokerage though estimates Bharti and Idea's data traffic to a see 60% CAGR during 2016-19, which would lead to an over 35% data revenue growth in the same period.

HSBC's Sharma said Bharti is relatively better placed than Idea to focus on ARPU as it can offer more data by leveraging its 4G airwaves in the 2300 MHz band.

"Idea's attempt at matching Bharti's offering in the higher-end plans has come as a surprise as it has selectively focused on capacity spectrum and more on coverage spectrum unlike the former, which is focused on both capacity and coverage spectrum," said HSBC.

Small wonder, the global brokerage feels Idea may have to add more capacity spectrum in future to sustain its ambitious data offerings even though it may immediately be in a position to offer more data, given that its network utilisation is less than 20%.

Going forward, Bank of America-Merrill Lynch expects Bharti and Idea to match Jio's tariff, and in turn, face pressure on implied data tariffs but not much on the ARPU front.

This, according to the US brokerage, is since Jio is likely to focus on offering more data at the same price-point rather than lowering ARPUs as such a move would impact their ability to garner a return from its business.